Technical Analysis Explained: Trading Congestion Entrance Here's a look at the Technical Analysis Explained series where we speak of congestion entrance, a type of trading . Movements in the market occur from trend to congestion and back again, in a ceaseless, evercontinuing cycle , continuing to repeat forever. This has occurred as long as markets have been in existence and as long as there are markets, it will continue to happen. The only times this cycle isn't seen include times of regulation, constraint that is artificial, and intervention , such as market regulation, price fixing, market suspensions, price limits, and more and then the disruption only occurs on a temporary basis. As long as there is variation in supply and demand , and as long as human beings come together in trade and act on their differing perceptions of value and opportunity , trends and congestions will continue in the markets. We can call it by many different names . Often the idea of equilibrium and disequilibrium are discussed, some speak of vertical moves and horizontal moves talking about the way the charts move , there are some that talk about the upward movement as distribution and development is referred to as the movement sideways. It's all just the very same thing with different terms. A trend is a movement that can take you in a particular direction ; congestions are market periods where the market oscillates between support and resistance and it's movement is horizontal . We saw in earlier articles in our Technical Analysis Explained series that we have a clear definition of what a trend is it includes on one side of the Pldot, three bars that show up consecutively. Since a congestion is the opposite of a trend , the definition of congestions should also be simple , and the definitely is simple. Congestion occurs in the market when for three periods it doesn't close on one side of the Pldot . How could it be different ? We say the market is either in a trend or not , and we know what a trend is , so a congestion is basically everything else. Markets are either in congestion, or they are in a trend. Now congestion must be broke down into three different parts , as we look at the three congestion types congestion entrance, congestion action, and congestion exit . But here, as an overview, let's just set down the definitions . Congestion entrance trading happens after the market is in a trend, where there are three or more closes on a side of the Pldot , but then the next bar closes on the opposite side of the Pldot . So that bar , closing on a different side than the previous bars , is the first bar of a congestion , and it's the first one after the trend . Congestion action trading happens when the market goes back and forth , closing on one side or the other side of the Pldot as it moves forward bar by bar . In the next article we'll discuss this more in the Technical Analysis Explained series. Congestion exit trading occurs as a new trend is about to occur and the market is leaving congestion. That makes sense, does it not? If congestion confines are violated by the market , by the dotted line or
even the block level, then this is congestion exit trading that is being manifested . Again, there is a lot, a very lot, to say about congestion exit trading , and the topic is interesting . However, this will be addressed later and so we will not deal with it more here . Keep an eye open for articles on the topic later. Ted Hearne is a Forex and bond trader who has written extensively about trading and has coauthored a "technical analysis explained" course called "Drummond Geometry". His biography and further information about his work can be found at the technical analysis explained website.